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2 Comments

💳 How to charge enterprise clients by credit card - upfront or after usage?

I'm working on a product for enterprise clients. It's a small utility web app for corporate teams. Little money for them, but not bad for me - a guy who wants to escape a 9-5 job.

Facts:

  • The team owner provides a credit card.
  • I want to charge by team size. It can vary a lot by a corporation.
  • I don't want to make complicated usage calculations. Team member added in the middle of the month is treated the same as team member added at the beginning of the month.

I came up with two pricing models.

💰 Upfront payment with naive team size calculation

Scenario:

  1. Free trial (no credit card required)
  2. The app stops working and asks for a credit card
  3. The team owner provides a credit card number
  4. The app charges money immediately based on the current number of users in the team
  5. The app starts working
  6. The app charges money every 30 days

➕ Pros

  • No risk of invalid credit card
  • No problem of clients refusing to pay

➖ Cons

  • Possibility of fraud - the team owner can remove all users on billing day and add them the next day

💰 After usage payment with more advanced team size calculation

Scenario:

  1. Free trial (no credit card required)
  2. The app stops working and asks for a credit card
  3. The team owner provides a credit card number
  4. The app starts working
  5. The app charges money after 30 days based on the maximum team size detected in this period
  6. The app charges money every 30 days

➕ Pros

  • No possibility of fraud because of more advanced team size calculation

➖ Cons

  • Risk of invalid credit card or having to validate credit card by charging $1
  • The problem of clients refusing to pay

What do you think? Do you have other ideas? 🙏


  1. 3

    What I learned working with large organizations is that they prefer stability or predictability over the amount that you want to charge. So $99 per month for up to 10 people, works better for them then one month $32, next month $48, third month $16. It might be that billing per seat is stable enough, but keep that in mind.

    I would go for upfront. The con of being able to remove team members can be removed by pro-rating any new or removed team member. Stripe does this automatically by the way. (So if you add a team member 2 days before the next billing cycle, 6,7% of a full month is charged. If you remove a team member on day 14, 50% is discounted on the next invoice).

    I would also definitely add a yearly pricing plan. Again, predictability :) They receive budgets for a year and have to spend that.

  2. 1

    Strongly believe option #1 is the right way to go. On the fraud scenario...if people are really doing this, you likely have a bigger problem than when you bill. It's corp money, and that's a lot of work to save Big Corp money (not my money). I have to spend my time to do that but get no reward. Plus, as a user, I would expect that when I add them back the next day, I would get charged again (upfront), so I'd have no reason to try that.

    +1 to @timanrebel on yearly. Typically priced at ~80% of 12*monthly pricing, making 10 months the break even. People will buy this simply so they don't have to submit expense reports every month

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